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Nirdhan Very Poor People Case Study Final Version 08-08-06

Nirdhan Very Poor People Case Study Final Version 08-08-06

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Published by: Poverty Outreach Working Group (POWG) on Apr 25, 2011
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02/07/2013

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08/08/06
PROMISING
 
APPROACHES
 
IN
MF/MED S
ERVICES
 
FOR 
V
ERY
P
OOR 
P
EOPLE
C
ASE
S
TUDY
Nirdhan Utthan Bank, NepalFunded bySave the ChildrenWritten byJohn BerryJune 2006
 
T
ABLE
 
OF
C
ONTENTS
Executive Summary .............................................................................................................i1. Context ............................................................................................................................11.1. Country Socioeconomic and Poverty Data ..............................................................11.2. Local Context – Target Area .....................................................................................22. Organizational Framework ............................................................................................. 72.1. International Organization ........................................................................................ 72.2. Local Organization ....................................................................................................93. Description of “Very Poor” Target Group .....................................................................173.1. Individual and Household Conditions .................................................................... 173.2. Socioeconomic conditions ......................................................................................184. Poverty Targeting and Assessment ................................................................................204.1. Poverty Assessment ............................................................................................... 204.2. Poverty Targeting: .................................................................................................. 215. Products and Services .................................................................................................... 235.1. Financial Products ...................................................................................................235.2. Microenterprise Development Services ..................................................................255.3. Non-financial Services ............................................................................................265.4. Design and Product Development: ........................................................................265.5. Implementation Process .........................................................................................326. Results ............................................................................................................................336.1. Method of Measuring Results .................................................................................336.2. Impact ..................................................................................................................... 346.3. Cost Effectiveness and Sustainability ....................................................................347. Conclusions ....................................................................................................................397.1. Challenges and Pitfalls/Lessons Learned ................................................................39Appendix 1 ....................................................................................................................43Contacts and Sources of Information ............................................................................43Appendix 2 ....................................................................................................................45Socioeconomic and Poverty Indicators: definitions, explanations and sources ...........452
 
Executive Summary
Save the Children and Nirdhan Utthan Bank have worked together since 1997 to increaseaccess to financial services for poor women and other vulnerable groups in rural Nepal.With institutional capacity building and technical assistance from Save the Children, Nirdhan has successfully re-engineered its methodology and introduced flexible new products to reach those in remote areas with little or no assets. These innovations havedriven Nirdhan’s growth from 3,000 clients to over 70,000 clients, making it Nepal’sleading women-focused microfinance institution. Nirdhan Utthan Bank is headquartered in Bahairawa, with branch offices in ten districtsin the southern lowland and central hilly areas of Nepal. Nirdhan was founded as an NGO in 1991 and began offering financial services in 1993. In 1998 Nirdhan UtthanBank (“the bank for the uplifting of the poor”) was registered. A year later, NirdhanBank received a license from the Nepalese Central Bank and began operations as amicrofinance bank. Nirdhan’s mission is to offer financial services and to improve the social awareness of underserved poor people in Nepal. The leadership of the organization is fully committedto serving the poor 
through sustainable activities
. Nirdhan’s Chief Executive Officer isa visionary former central banker who has been a major force in the development of themicrofinance industry in Nepal. The General Manager is a pragmatic former commercial banker with a firm grasp on the finances of the organization. The work culture that pervades the organization is a reflection of this leadership. While serving the poor is the paramount value of Nirdhan’s organizational culture, there is an equally strong awarenessthat without a healthy loan portfolio that generates sufficient revenue to cover costs, Nirdhan will cease operations. New staff members are trained on these principles fromtheir first days with the organization. Nirdhan Bank targets the poor in underserved areas of Nepal. As of May 2006, Nirdhanserves 74,000 clients, including 58,000 borrowers. A recent external poverty impactstudy estimated that
 
37%, or approximately 27,000 of Nirdhan clients, are poor and 26%,or approximately 19,000 of Nirdhan clients, are very poor.To ensure that its services are reaching the poor, Nirdhan has developed a number of  poverty targeting methods. One very simple method of targeting the poor has been toopen branch offices in areas where poverty is endemic. Poverty levels in Nepal arehighest in the rural hills and mountains, where Nirdhan has recently opened several new branches. Once Nirdhan identifies a potential area for expansion, they implement a rapidrural appraisal survey and speak with local leaders to determine areas which couldsupport a branch office. After choosing a new branch location, Nirdhan staff organizehousehold surveys to identify potential clients. Once potential clients have been selected, Nirdhan’s main targeting tool is a means test which is implemented by loan officers at thehousehold level and intended to select only those who qualify as poor to become groupi

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